Abstract
The objective of this paper is to build an index of financial liberalization in Tunisia using the Principal Component Analysis method over a period of 36 years from 1980 to 2015. In addition, this paper also includes econometric estimates terms of cointegration and causality between financial liberalization policy and economic growth in Tunisia. To do this, we adopt a methodology which is based on an analysis in terms of causality. This approach requires passing through three stages. The first step is to check the properties of time series (stationary and integration order) of the financial liberalization index and economic growth through the use of unit root Dickey-Fuller tests. The second step seeks to examine the long-term relationship between the two variables by using a multivariate analysis Johansen. Finally, the third step seeks to determine the direction of causality between the financial liberalization index and economic growth by applying a vector error correction model. The results show that the two series are integrated of order one (I (1)), the existence of a long-term relationship between the financial liberalization index and economic growth and the presence of causality Granger unidirectional of financial liberalization index to economic growth.
Highlights
The process of financial liberalization in Tunisia began in 1987
The author aims to check the direction of the existing causality between financial deepening and economic growth by using an error correction model (ECM) that can analyze the short and long term relationship between two phenomena
(1987), error correction models (ECM) possible to capture with a single specification of the long-term and short-term bonds that exist between the two variables
Summary
The process of financial liberalization in Tunisia began in 1987. Since various liberalization measures have been implemented to broaden and deepen the financial system. The construction of our index includes six different elements used in the process of financial liberalization, which are: Liberalization of interest rates; Introduction of mandatory reserves; Establishment of prudential regulation; Removal of barriers to entry in the banking and financial system; Remove the sectoral allocation of credit; Privatization of state banks. The index for the individual components of the financial liberalization policy is calculated by substituting the values DTIt , RCCt, PSBt, RRRt, RBSt and SBEt equation (2) in. The improved financial liberalization index is a composite index calculated from the regression of financial and monetary reforms, including the interest rates, reserve requirements, credit control, the bank privatization, elimination of barriers to entry and prudential regulation it is less interested in its value at its trend over time. The level has risen since 1987, the year when the first financial liberalization measures were applied in Tunisia
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